In keeping with announcements made during the 2021-2022 Federal Budget, the government has announced that it will increase the maximum releasable amount that contributors can draw upon in making their first home purchase. This is after the proposed changes received Royal Assent on 22 February 2022.
The First Home Super Saver Scheme (FHSS), was set up in 2017 as a way to help first time home buyers save towards a home deposit faster through their superannuation. These voluntary contributions would be subject to the concessional tax treatment of superannuation. This currently means that they will have a lower tax of just 15% applied.
This option is more beneficial compared to the alternative of a savings account, whose contributions would come from monies already deducted income tax. And once the funds are in the savings account, would also be subject to capital gains tax for as long as they sit in the account.
A major change to the FHSS is the increase in the maximum releasable amount to $50,000 from July 2022, up from just $30,000 currently. This amount can be taken from eligible contributions made from when the scheme started in 2017. Housing experts like Arjun Paliwal of InvestorKit note that while this will boost deposits for first home buyers and the demand side of the housing market equation, longer-term priority to supporting the entry of first home buyers and reducing rents was needed.
In a bid to further aid young families looking to get on the property ladder, the government will also be reducing the eligible age at which seniors looking to downsize can opt to put the proceeds from selling their property towards their superannuation. The eligible age has been reduced from 65 years to 60 years.
This change is expected to boost the stock of larger properties better able to accommodate growing families. the government hopes more seniors in this age range will be encouraged to downsize, allowing younger families to buy these larger homes.
Changes have also been made to increase the powers of the Commissioner of Taxation in making decisions on FHSS requests. The Commissioner will also be empowered to return released funds to super if the amount has yet to be released to the individual. The returned monies are however to be considered as non-assessable and non-exempt income that does not count towards the individual’s contribution caps.
Contributors towards FHSS will also be allowed more freedom in withdrawing or amending their requests before the FHSS amount has actually been received. If they decide to withdraw their request, they will still be permitted to reapply for this release at a later date.
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